Gregmal

Know we had a bourbon discussion going here awhile back….anyone ever tried Balcones? Tried a few from that line and it’s probably one of the most absurdly unique bottles I’ve had in awhile. Better than stuff 5x more expensive. Got me kinda interested in Texas Whiskey now.

For better or worse, I’ve been buying A LOT of Perishing Square last couple weeks. Tax stuff be damned.

LOL yea I ran into a guy once who was pompously boasting about how "I got fired for being too bearish" a couple years before the GFC. And all I could think was "weird thing to be boasting about. And obviously you got fired for not making money, which was the purpose of your job"....There's some bizarre bravado with the bear crowds. Never quite understood it. Then theres also this whole thing where you look at a lot of them, at least the ones who actually do manage money, and you find out that during the down years they didnt even make money, in many cases they lost just as much as the people who just did their normal investing thing...and its just like wow, WTF is the point of playing this game? If you cant handle the stock market, dont play in it. Plain and simple.

The simplest example of simplification is with Berkshire… I know Berkshire will exist. I know they will be profitable through the cycle. I know they will survive the cycle. My yearly earnings will vary but almost always be positive Capital allocation will be rational Thats it. WTF do I need to give two hoots about whether we get a rate cut in March or June for if I’m comfortable with the above? Lol it’s so dumb these games some people play.

The general concept is that the more things you need to correctly predict for an investment to work, the higher the payoff should be; obviously accounting for the complexity involved in predicting more and more variables. Much like a parlay in gambling. The issue with much of this scammy macro crap, is that people spend loads of times contriving these mega theories, often getting paid for content or seeking freeloading subscriptions, or whatever. The main thing is that they are benefitting from something not tied to the actual results of “the idea”. Even more perplexing, is the ones that do make their forecasts actionable, go through all that work, and often arrive at some simple, low payoff crap like “I’m short Amazon” or “long t-bills”…and it’s just laughable cuz it’s like what’s the friggin point? The solution in my eyes is to just focus on attractive and reasonably priced businesses that are durable and some combination of iconic, well capitalized, or structurally significant to some kind of tailwind driven theme. Then just stick with it and prudently invest through the cycle. The less complex you can make complex things, the greater the advantage you have.

Nah, the global macro guy would say "wages up means wage price spiral"...then look to cherry pick a tenth of one percents monthly fluctuation on some dataset and raise a textbook to support that claim.

Inflation done with jobs plentiful and wages actually outstripping cost of living increases.....clearly a recession is imminent. Thank god for the global macro guys.....

Man those macro guys are so smart. Really nailed it with the pessimism and caution advisory and it paid dividends in avoided that devastating 0.83% decline yesterday.

The general problem I have with the macro guys, much like with short sellers, is they can never just be honest or balanced...they ALWAYS need to misrepresent, or grossly exaggerate, or outright lie when they present their "thesis". And then when there's finally some verdict, there is almost never accountability. Its like OK, you predicted the market would crater at this rate level, and we 're at all time highs...."oh well thats because the Fed wasnt really doing QT"....or Oh you said we were already in a recession and the economy was rolling over....2 years ago....why no recession? "Oh thats because the government keeps spending"...Ok....well...you were wrong then, no? "Oh I was right the government just keeps propping up the GDP number"...Ok...so you predicted a recession and declared we were already in one, and then when that doesnt come to fruition its not because you were wrong, its because of all these excuses? Couldn't you have just predicted these excuses and gotten it right LOL? Anyway, on to the "market" and "rate hopium" or whatever the topic of the week is....So isnt it amazing, how the market is supposed to be "forward looking"...and generally, it is. But then, in a situation like this, where its practically a GIVEN, that rates are coming down over the next few years, folks are obsessing over "March or June"....like it makes a friggin difference. Gundlach has been out hoping and praying and cheerleading his lingering recession call...saying "The Fed killed Goldilocks"....I am not really opining on whether or not we even have Goldilocks...but does one or two months in terms of timing, and 25 or 50 basis points REALLY??? determine whether Goldilocks exists? So we're back to the top paragraph where these publicity whores just keep mouthing off, and being dramatic, and.....distracting people from the main objective. Fun, fun.

Guys like Macro Alf are a perfect embodiment of the suckers who have sat around seeking attention via likes and retweets talking up borderline conspiracy theory level reasons everyone needs to be scared of the market. At the end of the day they miss nearly everything but feel like big winners every once in a while when we get that brief pullback. World beaters after a 1% down day it seems. As if it vindicates all the time wasted and great investments missed. Yea, of course like all the great ones who play this game, he offers you subscriptions where you can give him his “risk free” return.

We already had this. 2022 was filled with people who for some reason, felt the need to blatantly lie, make things up, and deliberately misrepresent housing data…all over media outlets and social media. Not sure what the agenda was, but at best they were just seeking attention and didn’t actually put money behind the ideas they were promoting, at worst they got their heads handed to them. The supply and demand dynamics simply don’t support any sort of material decline. Neither does the consolidation in the home building space over the past decade. This time is largely different. On top of that, 2008 was an exception to the rule. Previously, housing as a whole was pretty damn difficult to topple. Many of the baselines that lead to the extremities of the GFC, were actually true. They just applied to a normal housing market, with standard lending and securitization practices, not the monster that was created leading up to GFC. For the things you are insinuating to even begin to occur above, you need 1) significantly higher rates than here…probably not happening 2) the 80+% of the people who currently own their homes for the purpose of shelter, to out of nowhere, warp their fundamental views of their home into some financially measured instrument. Also a very long shot.

I generally just try to be an absolute pig in situations where I can’t lose. In order to not lose you need something that is iconic, indestructible in terms of its capital structure, and riding the wave of long term secular tailwinds.

One of the Ten Commandments of Trading, which at its core, is what every SELL decision is, is to never sell a 52 week high.

Exactly...NYC suburbs are on fire right now. So even in challenged markets, theres still very favorably supply/demand characteristics and if anything, the "pockets" are where the challenges are, rather than the overall all regional pictures being described as "bad, with pockets of good", if that makes sense. Further, in the event of macro weakness, this almost certainly becomes the catalyst for lower rates, which then subsidize the "net monthly payment" equation, further supporting prices. So we're still doing the Chinese finger trap thing with rentals versus home ownership. Both eb and flow but fairly inevitably continue to be the catalyst for each other and so we should continue higher for the foreseeable future. I just got a 10% rent bump in NWFL...its anecdotal, but certainly closer to reality than a lot of the cherry picked stuff you see the Twitter experts and macro alarmists proclaiming.

Yup. There is no credible bear thesis on housing currently. Nor has there been for probably 15 years, despite all the crash calls from the supposed "experts". The best you can do is make very regional arguments that tie into an exodus from high tax, high crime blue states. NYC, Chicago, LA/SF....other than those places, housing is gonna be fine.

From what I can see, the most likely scenario with builders is that pricing comes down modestly and that combined with somewhat lower rates creates the equilibrium everyone was seeking. Noway crashing or going back to precovid any time soon, or ever again imo. But every market I follow(Northeast and Southeast) there’s boatloads of demand probably 5-10% below current prices. Builders are pretty much choosing higher margins(as many of the building product inputs have collapsed further enhancing margin) or having to work more. The nationals like DR Horton or KBH will lower prices to move inventory but the regionals are probably more content working less and making the same.

Yea I think a lot of this sort of data gets woefully misrepresented, and quite often. Boats, sure...Ive noticed people have reverted to the mean on their love affair with boating, away off from peak covid. But the home sales for instance, are hardly this presented economic disaster in the making. Builders are making astronomical amounts of money compared to pre covid. So theres this, but then also the fact that theyre all still pretty much trading at single digit multiples....so what exactly does the market need to "wake up" to? If it was asleep, you'd expect 15x at peak earnings, not 8x. Im hardly bullish on the homebuilders, but the above doesnt really reflect anything important. Home sales slow when things get expensive and people dont want to move. If nothing else thats more money to be spent on wasteful discretionary consumer items.

Yea this idea seems conceptual to me. I haven’t seen any products or offers that really make this worthwhile or even possible. For the end dollar amount benefit it would probably be easier to just open one of those Citi diamond or Chase private client accounts and get $3000 offers. The process for a HELOC is also akin to applying for a mortgage in terms of paperwork which in itself would be a huge negative to me.

Either or. But mainly falls into the “landing guessing” category. Folks manufacture reasons to underperform all the time. At some point you just gotta snap out of it and realize that there’s no reason to be scared of your own shadow. Mainly because, your shadow can’t kill you.

The reason many non indexers underperform? Active management. The reason many active managers underperform? Fear that "something bad could happen".... Bottom line is if your investment isnt strong enough to endure a recession, or to deal with full economic cycles, its not worth owning in the first place.

Yea absolutely no clue. Don’t care either way. Predicting “landings” is a fools game. As we ve seen enough times already.

That’s what they said last year…that the 6-7% margin hurdle was just too much….heck we had people hooting and hollering about how attractive cash and t bills were at 5%….and the market did 30% or whatever. Just gotta make a decision based on the opportunity set. This year I’m slightly less margined, but still confident my aggregate easily exceeds the carry cost.

Knowing what you own is important. I have zero issue borrowing heavily against stuff like MSGS, FRP Holdings, the Berkshire or Fairfax stuff too would fit the bill. Stuff that has clear value and won’t get zero’d. For lots of last decade I then bought stuff like Google, Waste Management, Costco, Visa, etc…fully on margin. Essentially, Wall Street likes to scare people with tales of “well there was this one time”…and “if you bought xyz on (insert all time high before crash) you’ve never recovered” stories. I’m basically short the shit out of that fear mongering bullshit. Use your head and you should be fine, if not just stick to indexing. Like yea, I have access to the “max” button on the Yahoo finance chart for Berkshire Hathaway. I’m capable of seeing it has had a drawdown before. If I own it, I’m either not expecting that to happen, or perfectly ok if it does. Next….

Rolling average over the past 15 years is probably around 1.3x but it totally depends on the opportunity set. Have gone well over 2x a few times; lowest I think I’ve ever been is 1.1x. Really just depends. Wall Street spends a lot of money advertising things that prevent investors from maximizing their returns. The overall misrepresentation of levered investing is one of them. If for example, I am 60% long Berkshire, 60% long the SPY, and have a 15% position in index put options, I wouldn’t consider that risky at all. But my account statement would show 1.35x or whatever.

Yea a lot of the stuff we see people do makes no sense. Sitting on a bond yielding 5% is like paying 20x for a business with no growth and no inflation protection. It’s probably even worse. But people do it and then think Apple is expensive even though it’s got modest growth and inflation protection. Not saying I’m a buyer of Apple here, and I still wouldn’t even get out of bed for 5%, but the logic is head scratching. On Berkshire, it’s an index substitute with a few caveats. You don’t buy it to sit around spending all this time thinking about it. You buy it so you don’t have to check your stock quotes every month.